EMILY BOURKE: One of the architects of Medicare, Dr John Deeble says all the infighting around healthcare funding reveals a deeper strategy by the states and Commonwealth to have each pay more of a share under the new funding model.

The Federal Government announced it would bypass the Victorian Government and directly provide an extra $107 million to the state's public hospitals.

The Commonwealth said it had recalculated the funding based on new population statistic and lower than expected health inflation.

Both the Victorian and Federal Governments had accused each other of cutting health funding.

Dr Deeble says the argy bargy has a lot to do with how much the states and the Commonwealth can contribute to health care once the new funding model starts next year.

He spoke to Alexandra Kirk.

ALEXANDRA KIRK: Dr Deeble, was it as Victoria claims a Federal Government back flip because it had cut funding to Victoria or as the Commonwealth claims, Victoria making a cruel series of cuts with the Gillard Government going to the rescue?

JOHN DEEBLE: Well, certainly the Commonwealth announced a cut to Victorian money considerable in the state terms and it's now changed the way that cut to the state is being done. Instead of being done out of the health budget, it's being done out of some other monies. The effect on the state is actually no different.

ALEXANDRA KIRK: And the effect on the Commonwealth is no different?

JOHN DEEBLE: The effect on the Commonwealth is no different because it's cutting money to the state but itís not cutting it out of health.

ALEXANDRA KIRK: So what was going on? Who was right in all of this?

JOHN DEEBLE: Well, in some ways there's arguments on both sides but the background to this is a new system comes in, in July 2014 and that's based on activity. You know, the number of cases that go through and the number of times people see an outpatient doctor and there won't be any calculations on inflation and population as there are in the present system and that came in as part of a deal that was done under the Rudd government when he was going to take over a larger amount of the hospital.

As it turned out he didn't succeed but to get agreement he agreed to a certain amount of money that the Commonwealth would guarantee to pay over the period up to about 2014 and that's went through into the agreement that the present Prime Minister made and what that meant was the Commonwealth was fixed to pay a certain amount of money willy-nilly whereas the states would not and the states were cutting back on their spending because they didn't have enough money and that meant that the Commonwealth was faced with the awkward situation where the 40 per cent share that they were going to pay wouldn't be enough to run the hospital system so they wanted to cut back as well to keep the share approximately right and this is the way they chose to do it.

They relied on certain legalities in the agreements to do that cut back.

ALEXANDRA KIRK: So was it all about positioning themselves for the new deal that comes into effect from mid next year?

JOHN DEEBLE: I think so. I mean obviously people have said a bit about the budget surplus and then itís about the Commonwealth is trying to find some money desperately but I don't think that that would justify the big political fight that we've seen. I think they were positioning themselves for what would otherwise have been an awkward time when they said we will pay 40 per cent of the cost but that wouldn't be enough.

ALEXANDRA KIRK: What do you expect will happen from 2014? Will the argy bargy and the blame continue?

JOHN DEEBLE: I think before 2014 they'll have to have a look and see what the shares end up and then they'll have it a push because at least the Commonwealth ends up having paid in 2013/14 say 42 or 43 per cent but the new agreement there is 40, there is an awkward situation.

So I'll think they'll have to do some twisting and dealing anyway.

ALEXANDRA KIRK: Can New South Wales and Queensland expect similar top ups to Victoria?

JOHN DEEBLE: I think it is very hard to say on the grounds of why they shouldn't and I'm sure that there's little bits and pieces that the Commonwealth can round up to make the transfer payments to them. I think the other states will cut their hospitals but they won't say so and do so publicly and they may not do immediately.

ALEXANDRA KIRK: And then what will happen?

JOHN DEEBLE: Then we'll have a bigger problem in 2014.

EMILY BOURKE: That's one of the architects of Medicare, Dr John Deeble speaking there to Alexandra Kirk.

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